When the European Central Bank raised interest rates on June 11, its first increase since 2023, the news was unwelcome across the eurozone. It was especially unwelcome in Germany.

Across the currency union, growth is weakening while prices rise. Economists have dusted off a word last fashionable in the 1970s: stagflation.

At the start of the year, 2026 looked less alarming. Markets expected the Bank to sit still. Then the Iran war drove oil above $100 a barrel and eurozone inflation climbed to 3.2 percent.

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